Residential Nil Rate Band

The Residential Nil Rate Band

The residential nil rate band (RNRB) appeared a good idea. I overheard a conversation the other day, it went something like:

Lady: ‘… you can tell they’re an election soon, there’s plenty of talk of inheritance tax’

Man: ‘of course, they’ve increased it [the allowance] to a million [pounds]’.

First, the man could not have been more wrong. At a most charitable assessment, he was partly right.

They’ve Not Increased it to a Million

In the spirit of charity, the intention of the draughtsmen of the relevant legislation was that they wanted people to be able to say ‘the inheritance tax allowance [the amount one can give way before the tax is due] is a million pounds’. They knew such a statement would in almost all senses and circumstances be wrong or untrue – but why let the facts get in the way of a good story.

Things were Too Simple

The nil rate band is £325,000. There is an additional allowance for which one’s estate may qualify.

The extra amount for 2017 to 2018 is up to £100,000.

The maximum available amount will go up yearly.

For deaths in the following tax years it will be:

£125,000 in 2018 to 2019

£150,000 in 2019 to 2020

£175,000 in 2020 to 2021

If your estate qualified for this allowance, half a million pounds would be passed to your family before the standard rate of inheritance tax at 40% would be levied.

The RNRB only applies to the family home when it is being passed to direct descendants. The RNRB can like the RNB may be transferred between spouses and civil partners. If you downsized your property, your estate would not lose this allowance.

This is the inheritance equivalent of the dangerous dogs act. The legislation was drafted hurriedly, it was ill thought. It is messy. All thoughtful folk in this industry look forward to the repeal of this ghastly measure. It discriminates against certain classes of assets. It discriminates against people who do not have children. This law was written by people who appear to speak English as a second language and hadn’t studied the Inheritance (Provision for Family & Dependants) Act 1975.

The silliness of the law, it is what it is. We have to deal with life as find it rather than as we would like it to be. I’d guide you through the maze of inheritance tax. Simply call me on 020 8669 1779 or fill the form below to arrange a free, no obligation consultation on minimizing or even eliminating your family’s inheritance liability.